The 'Avon' of Rural Health - A Sustainable Solution for Defeating the Diseases of Poverty
Project Street Address
Project City
Project Province/State
Project Postal/Zip Code
Project Country
Focus of activity
Service/process
Year the initiative began (yyyy)
2006
Which of these barriers is the primary focus of your work?
Health care not consumer friendly
Which of the principles is the primary focus of your work?
Democratize access
If you believe some other barrier or principle should be included in the mosaic, please describe it and how it would affect the positioning of your initiative in the mosaic:
Barrier: Poor distribution of basic health commodities
Name Your Project
The 'Avon' of Rural Health - A Sustainable Solution for Defeating the Diseases of Poverty
Describe Your Idea
Define the innovation
Living Goods is an Avon-like network of village-based mobile Health Promoters who make a modest income selling essential health products at prices affordable to the poor in developing countries. The model combines the latest and best practices from the worlds of microfinance, franchising, and public health to create a sustainable system for defeating diseases of poverty. Living Goods (LG) reduces illness and death by significantly improving access to and adoption of simple, proven health interventions in the many places these are scarce or non-existent.
Living Goods focuses on the short list of diseases that account for over two thirds of mortality and can be prevented and/or treated at very low cost. These include malaria, diarrhoeal diseases, worms, and TB. The Health Promoters also provide basic family planning and reproductive health services with the twin aims of lowering fertility and reducing mortality for pregnant women and newborns. They market a diverse basket of goods anchored by essential items emphasizing prevention like bed nets, condoms and water treatment, and complimented with home and personal care items to enhance agents’ income and sustainability.
The core principal of the Living Goods model is using the incentive of ownership to maximize efficiency. Through the incentive of ownership LG creates a virtuous circle. The more the Health Promoter earns, the more time she will invest in her work, and thus the greater health impact she will have. And of course, as her productivity increases she generates more contribution towards making the whole enterprise sustainable.
Living Goods targets primarily smaller rural and peri-urban communities with inadequate access to essential health products, underserved by the existing public and private health infrastructure and with relatively high disease burdens
Context for Disruption:
Context for Disruption: In Uganda where Living Goods is working, half of the population lives more than five kilometers from the nearest public health facility. Where public facilities do exist frequent stock-outs are the rule. There are no pharmacy chains. The marketplace of private drug shops is fragmented, inefficient and is woefully under regulated. This results in the widespread occurrence of untrained providers, inaccurate diagnoses and prescriptions (it is not uncommon to find 13 year girls selling antibiotics), and worst of all, a high prevalence counterfeit and expired drugs.
The Living Goods model contrasts starkly with the existing landscape:
1) It provides access to basic commodities right in the villages where people live, eliminating the barriers of distance, time, transportation expense and lost productivity.
2) It achieves high efficiency and low prices through significant scale, leveraging the infrastructure of existing partners, tight business controls on costs, and high productivity driven by best-of-class marketing and merchandising.
3) In provides consistent monitoring and tight controls. LG field agents visit Health Promoters (HPs) in person at least once a month and conduct regular compliance surveys by talking directly to the end clients. HPs who violate the rules lose their business.
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BOTTOM LINE DISRUPTIVE CHANGES
1) Living Goods will provide high quality, low-cost access for essential health commodities to a wide population of the unserved.
2) It will replace or convert poor quality private sector providers.
3) By treating basic illness in the village it will take significant pressure off public health systems, thus reducing lines and stock outs at public health centers, and
4) Through effective peer education it will shift the emphasis of primary care for treatment to prevention.
Delivery Model
Delivery Model: GOING TO THE CUSTOMER
As noted LG is based on an Avon-like system of direct sellers. Like Avon LG does not need or depend on traditional print, radio or forms of mass advertising. Its direct selling model is driven by relationships – people selling to people they know. LG helps its Health Promoters employ a range of approaches for taking their message directly to customers and increasing the uptake of key health products:
• Giving health talks at schools, churches, local council meetings, MFI borrowing groups, and community groups
• Going door-to-door to talk with customers one-on-one
• Keeping standard daily ‘open hours’ at their homes or a convenient designated place
• Making health presentations at local events
• Setting up stalls at local market days
EFFECTIVE PROMOTIONS AND INCENTIVES
To support and drive adoption of key health products LG adapts best practice incentives and promotions from top direct sellers like Avon. Loss leader promotions are offered on various high-demand items each month. LG tests new promotions and marketing programs often: e.g. school based health screenings, health promotion days for women/children/seniors, frequent buyer discounts, free items with purchase over a certain amount, etc… Successful promoters may also earn points towards rewards – e.g. free product, phone cards, bicycles, etc…
CONSISTENT SUPPLY AND CAREFUL MONITORING
Field agents visit Health Promoters every 30 days to re-supply, collect payments, communicate current promotions, and provide ongoing health education and business coaching. LG provides HPs with a lockable storage chest and requires them to retain minimum inventory levels on key items. LG also requires HPs to keep detailed accurate records of all patient contacts and transactions. This data is collected by LG field agents and entered in a central database.
STRICT CONTROLS
It is a fundamental principle of the model that Health Promoters must adhere strictly to the core rules
Key Operational Partnerships
LEVERAGING KEY LOCAL PARTNERS.
Living Goods strategy is to partner with local NGOs, community groups, and microfinance organizations to leverage their existing infrastructure for recruiting and possibly financing and/or supporting mobile Health Promoters. To this end, LG extensively canvassed local organizations in Uganda of each of these types over the last nine months, including in-depth in-person interviews. From this group, LG distilled a short list of the most effective and motivated groups.
At the top of this list is BRAC, with whom LG is now partnering with on the implementation of Living Goods in Uganda. In just one year in Uganda BRAC opened 25 branch offices in eight districts in Uganda, created 1000+ village organizations with 30,000 members, and made loans to over 20,000 women.
BRAC Uganda is recruiting Living Goods Health Promoters from its existing VOs. The advantages of this are potent. The members of the VOs are essentially pre-screened by local officials and BRAC. The VO also provides both a natural customer base for the HP as well as an imprimatur in the community. Living Goods field agents work out of existing BRAC branch offices to train, support and monitor the mobile Health Promoters. Existing branch offices are leveraged as supply depots as well.
BRAC and Living Goods will work closely together on the pilot phase in Uganda. If the pilot is on track after the first 12-24 months LG will look to collaborate with other similar NGOs.
Financial Model
The key to the Living Goods model lies with the economics for the Health Promoter (aka unit economics). If the average HP generates enough sales with an adequate margin, the whole system will break even. The target retail sales per health promoter is approximately $2400 per year or $6.60 per day. At a retail margin of 25% and after expenses of about $100 the HP should take home about $500 per year, or just under twice the per capita income in Uganda. This represents ample income to motivate the HP to remain engaged and invest increasing time in her Living Goods business.
Achieving robust sales per agent is critical for becoming financially self sufficient. It is just as important for achieving LG’s health objectives. Here is why this level of productivity is achievable:
• Proven in Kenya: CFW Shops, under the leadership of Living Goods’ founder, was able to achieve comparable (and some cases higher) results in similar rural settings in neighboring Kenya.
• It is Affordable - Even where Income is $1/day: The average rural household in Uganda has 5.5 members. Assuming agents serve an area of about 250 households and 1400 people implies that that the needed sales per capita will be less than $2 per year, or less than15 cents per capita per month. Even in places living on well under $1 a day or $30/month, this level of spending is plausible.
The economics at the organizational level can also be boiled down to a few fairly basic assumptions. The target average wholesale margin is 16.5% and agents will pay a small $2.50 per month franchise fee to Living Goods. This results in a contribution to LG of about $325 per year per HP. The question then simply becomes: At meaningful scale can LG support agents at a cost of ~$330 per year per agent, or about $25 per month? The budget in the appendix details how LG aims to accomplish this. But in a developing world context, the $25 a month number passes the gut test.
What is your annual operating budget?
$510,000
What are your current sources of revenue? (please list any sources that are foundation grants)
> The San Francisco Foundation
> The Mulago Foundation
> The Horace W. Goldsmith Foundation
> The Draper Richards Foundation where the founder was recently elected as a fellow
> Other anonymous private donors
> Within six years Living Goods aims to be 100% self funding from the wholesaling margin on its products.
Effectiveness
Living Goods is in start up mode this year and just recruiting and deploying its first 200 Health Promoters. LG aims to accomplish the following goals in its first five years:
• Improve access to and adoption of affordable health products in underserved communities by deploying 3,000 well-trained, well-stocked mobile Health Promoters serving a total population of three million. Target sustainable income per agent of US$ 200-500 per year.
• Materially reduce mortality and morbidity rates, especially for children under 5 and their mothers - proven through university quality control studies.
• Save poor families money on health care and keep wage earners healthy and productive.
• Become financially self-sufficient on a run rate basis.
• Propagate the replication of the health micro-franchising model by creating an advisory division to help social entrepreneurs replicate the model in other countries.
Which element of the program proved itself most effective?
DIVERSE PRODUCT MIX DRIVES SALES
Living Goods emphasizes keeping families healthy through the promotion of insecticide treated bed nets, water treatment, vitamin A and condoms. The product offering also includes basic treatments for common deadly diseases including malaria, diarrhoeal disease and worms. However LG goes beyond the typical product mix offered to community health workers, by providing its agents a broad basket of items that help her increase sales and, thereby, bolster her financial sustainability so she can remain engaged and effective in the long-term. This is a key differentiator of the LG model. Thus, LG Health Promoters also sell personal care products like feminine hygiene, skin lotion and toothpaste, as well as products that contribute to household income or savings such as foot-powered irrigation pumps, solar lanterns or high yield seeds. Agents may only offer products acquired from Living Goods and must adhere to a standard pricing. They are required to be adequately stocked on ‘essential’ health items. LG collaborates with local Ministries of Health on prioritizing and promoting key health products.
Number of clients in the last year?
In its first calendar year LG aims to deploy 400 Health Promoters serving 250 households each with an average family size of 5.5 thus reaching a total population of 550,000.
What is the potential demand?
The target population for the LG model are households in moderately dense areas with high disease burdens living on 50 cents to $2 a day. In Uganda, with a total population of 27.5 million this target group is at least 30% of the population or 8.25 million.
Living Goods plans to replicate in countries with similar profiles in sub-Saharan Africa. The total population of the region is about 750 million. Conservatively this model should work in 20-30% of that area or for 150-225 million people. This works out to be $360 - 540 million per year at retail.
Scaling up Strategy
The number one priority in the next three years is proving that our mobile Health Promoters can generate their target sales of $6.60 per day / $2400 per year with adequate profit margins. If can achieve this then we have the foundation of a truly and fully sustainable system. With sustainability as a firm base all other problems are solvable in the long term.
Stage of the initiative:
0
Expansion plan:
While LG is focusing in the near term on building an effective program in Uganda, it aspires most to demonstrate a sustainable model that will be copied widely across developing countries.
Job one is proving out the model in Uganda. This will be the singular focus of LG in the near term. That said, LG’s vision is to realize the replication of its innovative model across the developing world. After a two year start up period, assuming LG is meeting its objectives, the organization will begin replication in other countries. The following are some of the likely modes of replication:
• BRAC Roll Out: BRAC is already operating in Tanzania and is initiating work in Southern Sudan, and Rwanda, with designs on yet more satellites. Naturally assuming the LG model succeeds in Uganda BRAC and LG will look to re-create it in each of these other African divisions.
• LG Owned Divisions: LG can build and manage systems itself in other countries under the Living Goods brand.
• Master Franchising: LG can grant master franchises to other organizations to operate Living Goods networks in one or more countries. Like a licensing arrangement LG would provide its system, technical support and possibly sourcing in exchange for an annual fee tied to sales.
• Technical Assistance
Origin of the Initiative
From the SF Chronicle:
“Chuck Slaughter is founder of TravelSmith. In 1988, long before the term "micro-enterprise" was a buzzword Slaughter came across a story in the NY Times about Trickle Up, an organization giving seed money to people in developing nations to start small businesses.
"It seemed like a lot more direct way to make a difference," he recalled. So he went to work for the group, seeing entrepreneurs at work in a range of activities from running tea stands to sewing dresses.
Three years later, he created TravelSmith. He sold his interest in the company in 2004 and later (as its pro-bono president) lead the turn around of a nonprofit called Healthstore, which helps Kenyans set up medical dispensaries in their villages.
(The challenges Healthstore faced in scaling and becoming sustainable) in turn inspired him to start Living Goods in Uganda.”
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This Entry is about (Issues)
What are your two main challenges to finance the growth of your initiative
1) As a social venture that is initially partially self funding, LG does not fall neatly into one of many donors existing categories. It is neither a traditional NGO, nor a profit maximizing business.
2) We have elected not to employ a full time development officer. So my time is stretched between program and funding work.
How did you hear about this contest and what is your main incentive to participate?
Diana Wells mentioned it to me when we met in California in May. Our motivation to participate is twofold
1) To attract potential operating partners (anyone from CARE to Natura), and
2) To benefit from critical feedback.
Do you have an annual financial statement?
Yes, we can provide 2006 FYE financials.
Do you currently have an annual financial statement that tracks profit/loss?
Yes.
Please describe the amount (and/or type) of funding you need to implement your initiative, at year 1 and at year 5.
See above
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